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Letter from the Chairman
Dear Shareholder, it is my pleasure to present the 2022 Annual Report.
The 2022 financial year was an excellent year for the rare earths market. Lynas, as an ethical and environmentally responsible producer was well positioned to flourish in this environment. The capability and customer relationships built over the past decade provided the foundation for our excellent results. I am pleased to report that Lynas achieved sales revenue of $920 million and Net Profit After Tax (NPAT) of $540.8 million. It is a credit to the Lynas team that they were able to overcome a number of challenges during the year to achieve these record results.
Production continued to be affected by the consequences of the ongoing COVID-19 pandemic. Team members were required to isolate and pandemic-related shipping and logistics delays required new solutions. Ongoing water supply disruptions in Malaysia offered significant challenges to our Malaysian production team. Despite these challenges, an 8% increase of NdPr production year on year was achieved.
Rare earths market prices and demand for NdFeB magnets remained robust throughout the 2022 year. As a leading supplier of rare earth materials, Lynas experienced strong demand for its NdPr product family and mixed Heavy Rare Earth compound (known as SEG) and this was a key contributor to the excellent results.
Good progress was made on the company’s Lynas 2025 growth plan which is aimed at increasing capacity and diversification of the company’s industrial footprint. Full approvals for construction of the Kalgoorlie Rare Earths Processing Facility were received in February 2022 and construction works at the end of FY22 were over 40% complete. Plans for the company’s expansion to the United States also progressed during the year. In June 2022, Lynas was awarded an approximately US$120 million follow on contract from the U.S. Department of Defense (DoD) for construction of a commercial U.S. based Heavy Rare Earths separation facility. The facility is expected to be co-located with Lynas’ planned Light Rare Earth separation facility (announced January 2021) which will be partially funded by the DoD.
As the world seeks to transition to cleaner energy sources, demand for rare earth materials for electric vehicles and wind energy has accelerated. In keeping with our objective of growing with the market, Lynas is making further investments to increase capacity in each stage of our operations.
Subsequent to FY22, in August 2022, Lynas announced an approximately $500m capacity expansion project at the Mt Weld mine and concentration plant with the aim of further increasing feedstock capacity in addition to implementing sustainability and circular economy initiatives.
Strong market prices and demand for Lynas’ products further strengthened our balance sheet during the year and closing cash was $965.6m. This provides a strong platform for our growth projects, including the Mt Weld expansion plans which will be fully funded from cash flow. Rare earths are used in attractive and future facing industries and Lynas occupies a unique position in the global Rare Earths market. The Board recognises that we operate in a highly competitive market and the skills of our team are in demand in the rare earths and other minerals processing industries. The Board continued to assess the external environment in line with talent acquisition and retention strategies during the year.
From a remuneration perspective, this means ensuring that overall remuneration continues to reflect balanced and fair outcomes in the current market. A review of the Lynas STI and LTI Plans was conducted to ensure they remained comparable with peer group companies.
Lynas remains focused on meeting customer, community and investor needs for ethically and responsibly produced rare earths. The company continues to develop initiatives to enhance Lynas’ climate change resilience and environmental, social and governance (ESG) performance and reporting and it is pleasing to see that these continued improvements were well received by the market in FY22. Accelerated demand for rare earth materials, Lynas’ unique market position, and progress on Lynas 2025 growth plans underpinned a significant uplift in market capitalisation during the year. On behalf of the Board, I would like to take this opportunity to thank Amanda Lacaze, her executive team, and all Lynas employees for their continued hard work and effective execution of the company’s growth plans. The Board would also like to thank you, our shareholders, for your ongoing support of the business. It was very pleasing to see Lynas realise the benefits of over a decade of hard work as the rare earths market strengthened this year and the Board remains focused on continuing to build shareholder value as we accelerate capacity to meet growing demand.
Kathleen Conlon
